President Mori Submits FY 2010 Budget Proposal to Congress

Government of the Federated States of Micronesia

President Mori Submits FY 2010 Budget Proposal to Congress

Palikir, Pohnpei (FSM Information Services): April 7, 2009 - Last week, President Mori transmitted the proposed FY 2010 budget for the FSM National Government to Speaker Figir and the 15^th FSM Congress. By law, every year on April 1^st, the budget must be submitted. The proposed budget contains operational, resource, and investment funding requirements of each department, office, agency, and program of the FSM National Government and matches them against anticipated revenues.

In his transmittal letter, President Mori stated that "the FY 2010 budget proposal is formulated at a time of greatest challenge and uncertainty for our Nation. Today, we are in the midst of a recession and face an economic downturn of historic proportions. Real GDP per capita has steadily declined from fiscal year 2005 onward, from $1,934 in 2005 to less than $1,832 in 2007 and an expected drop again in 2008 and 2009." The President said that this budget proposal is distinguished from previous budgets in that it provides a "blueprint for the Government to deal with the current economic and financial crisis and pave the way for a brighter future." The approach consists of spending cuts and savings, appropriate use of one-time resources to prevent the collapse of the Social Security and MiCare programs and the dedicated use of new, recurring revenues, in the investment in human resource and infrastructure development, and in capital formation through private sector development.

The FY 2010 Budget is formulated on the administration policy that core operating expenditures of the National Government remain at the current FY 2009 level and to apply a 10% budget reduction on travel and non-essential expenditures. When the original budget submissions were submitted by all Executive agencies, the total was over $46 million. Through the budget review process of the Executive Budget Review Committee, the proposed budget was cut to $39 million in order to balance it with the projected revenues.

Total revenues projected for FY 2010 are approximately $39,739,723 and include domestic sources, Compact Sector Grants, and money from Supplemental Education Grants (SEG). This projected revenue does not include potential funds from other US Federal grantor agencies, foreign governments and other international and regional organizations. Compared to FY 2009, total receipts from domestic and compact sources will increase by 1.3%, primarily coming from domestic revenues.

Total operating expenses for the three branches of the National Government, the Public Auditor's Office, and all agencies of the FSM government is $22,136,043, of which $15,219,405 or 68% is for the Executive Branch, $3,049,223 or 13.8% is for the Legislative Branch, $1,190,894 or 5.4% is for the Judiciary, $976,087 or 4.4% is for the Public Auditor's Office, $1,460,724 or 6.5% is for Boards and Commissions, and $239,710 or 1% is for all others. This represents a slight increase in total operating expenses of 0.2% for the Executive Branch, a decrease of 1.8% for the Legislative Branch, and a decrease of 1.5% for the Judiciary. Although the Executive Branch kept their operating expenses at FY 2009 levels and decreased travel by 10% or $234,658, contractual services increased by $178,178 because of an increase in lease and space rentals for FSM overseas embassy missions as well as the consulate offices and needed consultant services in the Executive Branch. .

In terms of Human Resource Development and Capital Investment, the total expenditure for FY 2010 is proposed at $12,822,983, or an increase of 84% or $5,818,678 from FY 2009. The increase is primarily attributed to the dry-docking of the MS Caroline Voyager, repairing and improvement of the FSM capitol complex, implementation of Year 2010 Census, investing in the FSM Development Bank and FSM Visitor's Bureau to spur greater productivity growth in the private sector, plus other programs. President Mori wrote that "this investment is crucial to laying a strong foundation for long-term economic growth as well as putting our people quickly to work and contribute to the development of our economy."

Together, the total expenditures proposed for FY 2010 is $39,739,723, which is an increase of $6,397,828 or 19.1% over FY 09. Based on the total revenue projected and the proposed total expenditures of the government, the National Government will have a balanced budget with no surplus. Now that the budget has been submitted to Congress, it will be reviewed, undergo possible revisions, and hopefully be approved during the May session of the 16^th FSM Congress.